Architects who are starting a firm for the first time may believe that there is little risk in their facing a lawsuit on the small projects they’ll be involved in. This mindset leads them to their decision not to purchase architect professional liability insurance. This is due in part to their belief that their assets are so limited that they don’t have very much to lose, or because their clients haven’t required they carry any coverage.
This policy is designed to protect an architectural firm and its employees against claims alleging negligent acts, errors, or omissions in the performance of architectural services. This differs from commercial general liability, or CGL, insurance, which is relatively standard regardless of the type of business, and usually excludes professional liability claims.
A professional liability policy provides a valuable benefit
The most valuable benefit of professional liability insurance is coverage for legal costs to defend against a claim. The insured will often be provided a lawyer to help gather and retain necessary documentation, and will avoid taking subsequent actions that could weaken the architect’s defense.
If a claim goes to trial, a small firm can easily become bankrupt attempting to get a dismissal on the grounds that the claim has no merit. Having such legal assistance might be even more valuable than having coverage to pay for any actual negligence. In addition, insurers may also offer ongoing risk management services to insured firms, which can help avoid having issues of this type in the first place.
Some of the more inexperienced architects are surprised to learn that they can be held liable for the negligence of contractors and others working on a project, or that negligence claims can be based on issues for which they have little control, for example, faulty cost estimates or delays in construction. Claims are sometimes based on planning or feasibility studies and don’t even require that the architect be the architect of record for a project.
Professional liability claims can be the result of a failure to manage a client’s expectations rather than any major construction failure. A client’s expectations can be unrealistic, but that won’t prevent them from filing a claim and even going to trial or arbitration.
Problems can also stem from a lack of communication, even in areas where a firm has clear expertise on a particular project type, which can result in client frustration and a lack of trust. These are just a few examples of situations demonstrating a need for architect professional liability insurance in the event of client dissatisfaction.